NAB Residential Property Index unchanged with stronger house price expectations offset by weaker rental prospects. Sentiment continues to soften in WA (an all time low). Big pick-up in foreign buying activity in new property (especially VIC) and tipped to rise further. Foreign buyers account for 1 in 6 new properties nationally (1 in 4 in VIC). First home buyers less active, local investors unchanged.

The NAB Residential Property Index was unchanged at +19 points in Q3.

NAB Group Chief Economist Alan Oster said: “While the overall index was unchanged, the picture was mixed across the country, with Queensland overtaking Victoria as strongest state, SA/NT the big improver and sentiment still falling very heavily in WA.”

The outlook for national house prices in the next 1-2 years improved in all states, but expectations for rental growth continued to be wound back in all states, except SA/NT.

A key take out from the survey was the significant pick up in foreign buying activity in new property markets across the country.

“Foreign buyers accounted for 16.8% of total demand for new property in Q3, or about 1 in 6 of all buyers, with this share tipped to rise to 17.3% over the next year. Foreign buyers were more active in all states, but especially in Victoria where they accounted for an estimated 24.8% of total demand, or 1 in 4 all new property sales” said Mr Oster.

The survey identified housing affordability as the biggest constraint on new housing developments in the country, while employment security continued to be the biggest impediment to buying an established home.

“This was not surprising given recent strong house price growth and rising trend unemployment” said Mr Oster.

NAB Economics’ analysis of the market suggests that house price increases will be more modest than in recent times because of rising unemployment, sluggish household income growth, affordability issues and cost of living pressures.

“We are forecasting average house price growth of around 4% through the year to September 2015 and 2% through the year to September 2016”, said Mr Oster.

“Brisbane and Sydney are expected to lead the market in the next year, followed by Melbourne and Adelaide, with Perth lagging”.

For the first time, individual state reports are available for NSW, Victoria, Queensland, WA and SA/NT providing a more comprehensive review of the survey results for each market.

These reports are available on request. For further analysis download the full report.

About the Author

Robert has been employed as a professional economist with the NAB Group since 1989. In 2010, he was appointed to the role of Senior Economist (Industry Analysis) and is currently part of a team of analysts that specialise in monitoring key business trends and identifying industries likely to provide the strongest growth opportunities and greatest risks.

In today’s Weekly we preview what to expect for the RBA’s forecasts and the narrative and risk around its outlook for the economy. We’re likely to see the Bank wind back the growth outlook and trim its inflation forecasts.